TECHNOLOGY & DISRUPTION
PROPTECH
also comes more sophisticated and informed competition for you to face.
That amount of funding for prop- tech surged in 2016 to $2.66 billion, according to CB Insights. And the growth trend doesn’t seem to be slowing. Global venture capital investment in real estate innovation skyrocketed to $12.6 bil- lion in 2017, according to real estate tech research and marketing agency Re:Tech. There are many examples of prop- tech startups attracting significant portions of this VC funding pie, in- cluding most recently Opendoor. The San Francisco-based startup flips homes in 14 cities through its online tool that aims to remove stress from the buying and selling process. As it’s gained traction, Opendoor snagged a $325 million investment in June 2018, followed by a September investment of $400 million, bringing the company’s total equity raised to
$1.045 billion. New York City-based startup Com- pass is also among the firms hoping to flip the traditional market of real estate. Compass is a tech-fueled brokerage that employs 7,000 agents who focus on high-margin, luxury homes in mostly coastal markets. The company says it is on pace to control 20 percent of residential property sales in the United States’ top 20 markets. Founded in 2012, Compass has surged in value to $4.4 billion, hav- ing raised a total of $1.2 billion in equity to date. The attention on proptech has also led some venture capital firms to specialize in the field. Los Ange- les-based Fifth Wall Ventures raised $212 million for its first fund and is en route to raising a second, $400 million vault.
THE GROWTH OF PROPTECH You’re probably already familiar with big players in proptech, and the financial bonanzas they’ve enjoyed. Companies like Zillow, Compass, Homelink, SMS Assist and Open- door have drawn multi-billion-dollar valuations as they vie to provide new software and hardware products to landlords, builders, property manag- ers and real estate investors. And as these proptech startups have grown more successful in developing solutions to improve the real estate market, venture capital- ists have keenly taken an interest. In 2013, proptech firms attracted $459 million in global venture capital funding, according to CB Insights.
Billions of Dollars are Heading Toward ‘Proptech’ INNOVATION IS CHANGING REAL ESTATE WHETHER WE LIKE IT OR NOT. WHAT'S IT MEAN FOR YOUR INVESTING?
QUARTERLY ANALYSIS: VENTURE CAPITAL DOLLAR VOLUME IN REAL ESTATE TECH
2015 2016 2017
Q1
While 2017 was filled with record highs, it also caused a moment of unrest. With rare exception, Q2 2017 caused pause for many in real estate tech. Compared to the same period last year, Q2 2016, dollar volume declined by nearly 37.6 percent, the first underperforming in three years.
Q2
by Bobby Burch
T
here’s a phrase in journalism to verify reporting and find the
capital dollars rushing toward real estate tech firms offering “proptech,” short for property technology. The buzzword is a relatively new term referring to the sector of startups that create new products or business models for the real estate market. While a broad field, proptech can include products or services for homebuyers and sellers, smart- home devices, office administration, building management, marketing, construction and even city-planning. Such venture capital activity is bringing a new level of legitima-
cy — and attention — to real estate investing. While it’s existed for de- cades in different forms, real estate investing has rarely been viewed as an industry in itself, but rather lumped into a broader bucket along- side other investment channels or seen as a hobby. With more well-heeled tech start- ups keen to serve an untapped mar- ket, real estate investors, funds and property management groups have more tools at their disposal than ever. But with the growing plethora of tech platforms focused on real estate
truth: “Follow the money.” The motto also applies to venture capital funding to determine what innovations are poised to emerge and wreak havoc on stagnant industries beholden to their status quos. So when you look at real estate, see its historical void of innovation and notice the deluge of venture capital heading to startups whose mission is disrupting business as usual, you’d be wise to pay heed. There are billions of venture
Q3
Q4
$0
$1,875,000,000
$3,750,000,000
$5,625,000,000
$7,500,000,000
Source :: Real Estate Tech Annual Report, 2017
22 | think realty housing news report :: february / march 2019
thinkrealty . com / hnr | 23
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